Strong Finish to Christmas Season Cheers Retailers

By JENNIFER STEINHAUER

Published: January 9, 1998

In a remarkable turnaround from a weak season, American retailers reported strong December sales yesterday, aided in huge part by shopping that occurred after Christmas.

The Goldman, Sachs & Company same-store sales index, which compares the results of stores that have been open at least a year, reported that retail sales were up 4.4 percent in December, compared with a meager 2.9 percent gain in December 1996 and well above the 3 percent gains most retail experts were forecasting.

But underscoring the profound shift in the way America shops, those strong showings were due almost entirely to the 48 hours before Christmas and the week after Christmas.

''Christmas arrived for us between 4 and 5 P.M. on the 23d of December,'' said Robert Burton, director of investor relations for the Kmart Corporation. ''The last two weeks made the month happen.'' The discount retailer said that thanks to the week after Christmas, sales in Kmart stores open at least one year rose 2.9 percent for the season.

They were not alone. Interviews with more than a dozen retail executives and analysts made it clear that for the most part, the Christmas selling season that began the day after Thanksgiving was a disappointment -- until it ended with a brawny finale as December came to a close. ''Santa came late and stayed for after Christmas,'' said Richard N. Baum, an analyst with Goldman, Sachs.

The Dollar General Corporation, for example, a discount chain, said that holiday sales gains for the first and second weeks of the selling season were 3.6 percent and 4.1 percent, respectively; for the fourth week, same-store sales leaped 19.8 percent.

More surprisingly, the after-Christmas period, which started on Friday, Dec. 26, when much of the country had the day off, essentially bailed many retailers out of an otherwise miserable performance.

''The week after Christmas was really what pulled us up to a positive number,'' said Elaine Crowley, the vice president for finance for the Bombay Company, a seller of home decor and furniture items.

Indeed, on the Friday after Christmas shoppers raced to the stores in search of half-price wrapping paper and tree ornaments, to redeem gift certificates and to spend their cash gifts on toys.

In Houston, local television news crews parked themselves in front of the Galleria mall, reporting with glee about the parking lot Santas who guided the glut of cars into spaces and the shoppers who swarmed in for marked-down sling-back shoes, ties and bread makers.

''The first couple of weeks of December found us below plan,'' said Jan Drummond, a Sears, Roebuck & Company spokeswoman. But the few days before the holiday and the final week of the month pushed the chain's gains to a healthy 4.5 percent, against a difficult comparison of 9.5 percent gains the previous year.

The last-minute shopping habits of consumers had merchants ripping their hair out for the better part of the season. ''We are all optimists,'' said Michael Goldstein, chief executive of Toys ''R'' Us Inc. ''So you say, 'It is coming at the end.' But we were all nervous.''

Mr. Goldstein said his managers were unhinged by weak sales early in the season, and were relieved by the strong showings in the final two weeks that led to the company's gain of 5 percent, a big improvement over last year's flat sales.

''We can't figure it out,'' Mr. Goldstein said. But children who got money for the holiday may have hit the stores the week after Christmas and Hanukkah, which this year ran from Dec. 23 through Dec. 30, increasing sales for that period.

In the last few years, time-deprived consumers have pushed their holiday buying closer and closer to Christmas Day, playing chicken with retailers on potential markdowns and leaving the dreaded trip to the mall for the last minute. People have also leaned toward nontraditional gifts such as travel, services and gift certificates for things as odd as drivers education classes or reflexology, leaving general merchandise retailers scrambling for sales.

Most significant, though is shoppers' insistence on value, which means they will give gift certificates or cash so that after-holiday sales can be taken advantage of, or buy gifts for the following season the week after Christmas to get the bargain. The American Express Company said sales of its gift checks -- essentially nicely wrapped gifts of cash -- rose 17 percent this season, compared with last year.

''Christmas doesn't mean buying gifts for Christmas anymore,'' Jeffrey M. Feiner, an analyst at Lehman Brothers Inc., said. ''Retailers can still have a good December now because the month is weighted with the week after.''

Many trends that marked the retail business all of last year were evident in holiday sales patterns.

Discounters, which offer everything from apparel to coffee makers, were one example. The Dayton Hudson Corporation's Target division posted 6.4 percent gains, while Family Dollar Stores Inc. said its sales rose 7.9 percent. Off-price apparel retailers had a similar Christmas story to tell, and one that reflected their strong 1997. Ross Stores Inc. and the TJX Companies both said their sales rose 7 percent.

Department stores, whose results have been inconsistent for the last year, remained so last month.

While the luxury players had a great season -- Harcourt General Inc.'s Neiman Marcus unit gained 8.8 percent and Saks Holdings Inc. saw a 6.1 percent rise -- those in the middle mostly suffered. Dillard Department Stores Inc.'s sales rose only 2 percent, and Federated Department Stores Inc. squeaked in with a 1 percent gain, which was particularly weak considering last year's sales were flat. The J. C. Penney Company saw its sales fall 2.3 percent.

And the women's specialty stores continued their run of ho-hum merchandise and sales to match. The Ann Taylor Stores Corporation said sales fell 10.1 percent, and Talbots Inc. fell 11 percent. Limited Inc. enjoyed a 7 percent gain, but that was a result of the stellar performance of its Intimate Brands unit and huge price promotions in its women's apparel stores.

Intimate Brands, which runs Victoria's Secret and Bath and Body Works, offers the kinds of things that women like to get and give, and the unit's success underscores the fact that the old retail standbys like sweaters and scarves no longer cut it with many shoppers.

It was also clear that the retailers with the very best showings had one strong week after another, even though the last two weeks of the month were the best for them as well. Dollar General proved this, as did Gap Stores Inc., which posted a 10 percent sales gain. ''We did a better job of being in stock on key items this year,'' Larry Shushan, a company spokesman, said. ''I think we also had improved merchandise this year, especially on the men's side.''

Graph/Table: ''Retailers' Sales in December'' shows year-to-year changes in the Goldman, Sachs retail composite index, based on monthly same-store sales, from September 1996 to December 1997 and lists percent change in retail sales, total sales and percent change in total sales for selected stores, for the five weeks ended Jan. 3 compared with the similar fiscal period last year. (Source: Goldman, Sachs, based on company reports)(pg. D3)